OPEC Back and Relevant Again
OPEC+ surprised oil markets by announcing that the producer group was going ahead with the April start of planned production increases amounting to 2.5 MMbpd over the next 18 months.
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OPEC+ surprised markets by announcing that 8 core members would proceed as planned to begin gradually increasing production in April, though it was stressed that, as always, the schedule is dependent on market conditions and may not only be paused but even reversed as needed.
The current plan will see the producer group hiking output by roughly 2.5 MMbpd over the course of 18 months, split between an unwinding of a 2.2 MMbpd production cut and 0.3 MMbpd upgrade to the UAE’s production baseline.
OPEC+’s decision to finally go ahead with the much-delayed plan was widely unexpected but reflects (i) internal member pressure to lift output, (ii) external pressure from the White House, and, potentially, (iii) anticipated Iranian export losses while maintaining plausible deniability with Tehran.
More broadly, the producer group traded revenue for relevance, shifting OPEC+ from its current role as a monthly delayer of planned output increases to an active factor in monthly reassessments of oil market outlooks
2.5 MMbpd over 18 months coming back to market. OPEC+ surprised oil markets by announcing intentions to move ahead with its planned output hike, slowly and steadily increasing crude production by roughly 2.5 MMbpd over 18 months beginning in April. This 2.5 MMbpd consists of 2.2 MMbpd of the final tranche of cuts by the OPEC+ Great 8—Saudi Arabia, the UAE, Iraq, Kuwait, Algeria, Russia, Kazakhstan, Oman—that initially began in the latter half of 2023 as well as a 0.3 MMbpd upgrade to the UAE’s production baseline that is phased in over the same 18-month period.
Let’s dig into what this means for the oil market and what it reflects about the current state of crude geopolitics.